Medicare "Benefit"

I had a discussion with my friend Lee last night about capitalism. This is not a new topic for us by any means, especially since he frequently finds himself having disputes with the socialists at the university he attends for graduate school. But last night he made a fascinating statement:

The ultimate goal of a capitalist society should be to advance medical research.

My initial reaction to this statement was to crinkle my brow and wonder where he came up with this crazy notion. We talked about the idea a bit more, but it was late and I had to go to bed. Today, I've continued considering what Lee said and I think he may be onto something.

While reading this analysis of the additions to the Medicare prescription drug program, which are scheduled to take affect January 1, 2006, I was struck by how much it seemed to validate Lee's statement.

Though we all enjoy the fruits of the recent burst in pharmaceutical R&D, no one wants to pay more than he or she needs to, even for something as valuable as medicine. But if no one can recoup the expense of developing new prescription drugs, no one will undertake that expense.

[...]Government will inevitably influence the marketplace, even if only through public browbeating and the threat of political action. Far worse, however, would be for government to impose price controls, whether enacted formally by legislation or implemented informally through indirect controls. Vernon, Santerre, and Giaccotto warn, “While the federal government’s success in exerting downward pressure on real drug prices may have benefited consumers in the short run, because lower drug prices improve access to existing pharmaceuticals, this influence has undoubtedly come at the cost of reduced levels of pharmaceutical innovation.”

I think this is the point Lee was trying to make. What motivation is there to develop new and better drugs if there is no payoff? Obviously, there are elements of humanity included in invention, but how can you force the drug companies to produce if they won’t even be able to recoup their R&D costs, let alone profit?

This change to Medicare will benefit some seniors now, but we will end up paying for it down the road with our lives.